Ch 4 Additional - Perfect competitive market There are many producers producing similar(standardized products thus any producer does not have power

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There are many producers producing similar (standardized) products, thus any producer does not have power to determine the market price by himself/herself Instead, consumers can react to the price change made by producers In the end, the market (equilibrium) price will be determined by consumers and producers together through their interactions Demand curve -Rational behavior of consumers Rational consumers in the Market Place: Look at the Price (P) – decide – quantity to buy (Q D ) If P goes up, Q D will go down If P goes down, Q D will go up Negative relationship D ) P – vertical axis Q – horizontal axis We’ll now derive the Market Demand curve: We assume there are only 2 individual consumers in the Market Consumers A Price is at $5, Q is 2 Price is at $2, Q is 5 Consumer B Price is at $5, Q is 2 Price is at $2, Q is 10 Market Demand Total: At $5 = 4 units Total: At $2 = 15 units Market Demand will always have a negative slope! Part A
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This note was uploaded on 02/03/2010 for the course ECO 2013 taught by Professor Zhou during the Spring '08 term at The University of Texas at San Antonio- San Antonio.

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Ch 4 Additional - Perfect competitive market There are many producers producing similar(standardized products thus any producer does not have power

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